Serco Group plc Record pipeline; 8% FCF yield: Still attractive at 8% FCF yield and FY27e buyback potential of c10% market cap, in our view.

Research evidence excerpt

Equity Research

European Business Services

10 August 2026

Serco Group plc

Record pipeline; 8% FCF yield

Still attractive at 8% FCF yield and FY27e buyback potential of

c10% market cap, in our view.

SRP.L/SRP LN

A positive update post 1H results overall with clear messaging that Serco is well positioned in

the current UK government procurement environment. Contract awards are slightly improving

in the US and productivity opportunities are still plentiful across the group. Serco still looks

attractive on a c8% FY27e FCF yield, in our view, and defence remains a structural growth

opportunity for the group. The bid pipeline remains at record highs, and the rebid and attrition

profile is a little higher than we initially modelled for FY27/28 (FY27e EBITA lowered by c2%), but

is still at typical levels vs history, and company consensus for FY27e adj EBITA looks sensible (we

are inline). The balance sheet is strong, in our view, with a further buyback worth c10% of

current market cap possible with leverage taken to 1x by YE-27 (assuming no M&A).

Moving parts for FY26/27/28e

Unchanged

POSITIVE

European Business Services

Unchanged

GBp 300

Price Target

Unchanged

GBp 260

+15.4%

Price (06-Aug-26)

Potential Upside/Downside

Source: Bloomberg, Barclays Research

2533

974.30

99.99

1.9

1.79

16.97

87

Market Cap (GBP mn)

Shares Outstanding (mn)

Organic growth in 1H26 of c2% was ahead of the c1%, guided with North America and UK

immigration slightly stronger. The 2H uplift to c4.5% is supported by contract mobilisation in

UK/Australia; we lap attrition from the Australia Immigration contract, task orders from a new

contract won in the US, and an assumption that procurement activity continues to slightly

improve in the US in 2H. Guidance for FY26 overall looks well underpinned.

For FY27/28e, we have refreshed visibility on Serco's major contracts (file available upon

request). Outside of UK asylum-seeker volume declines (always part of our assumptions until

this contract is rebid in 2029), we have more visibility of known attrition and rebid risk for

FY27/28e.

Health services personnel provision to the Australian Defence Force has been extended for a

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